January 29, 2020
Introduction
Legislators across the country are pushing for name, image, and likeness (NIL) laws to be enacted. These laws would permit student-athletes to profit from using their identity to promote commercial products and services (i.e., secure endorsement deals).
On the face, it sounds reasonable that student-athletes should be able to earn money from their commercial marketability. Who cares if the local grocery store wants to pay a student-athlete a couple hundred dollars for an in-store meet and greet session? I think most people would say that is okay. However, it only takes one second to see how this could be abused. What if the local grocery store wants to pay this same student-athlete a couple hundred thousand dollars for the same in-store meet and greet? It feels different now, doesn’t it?
At this point, I don’t think it matters whether you support student-athletes having the opportunity to be compensated for commercial use of the name, image, and likeness or not. This is the new reality and we are tasked with designing the appropriate solution.
I’ve heard contrasting ideas on what the NCAA’s next steps on NIL should be. There are those that say that the NCAA should eliminate all restrictions and make it an open market for individual student-athletes to freely monetize their NIL rights for whatever they are worth. I tend to like the group license idea more – mostly because I think student-athletes need help navigating the marketing space. Most 18-22 year olds are not experienced enough manage all of the associated real world tasks (identifying endorsements, negotiations, taxes).
So here is my proposal:
Group License Income Pools
Think about a group license, where student-athletes essentially grant permission to the group to be the exclusive rights holder of their NIL. Then add in the concept of an income pool where any income earned beyond a certain threshold is shared with the rest of the group.
It’s complicated. I’ll explain how it works.
A group of student-athletes come together and join an income pool and make this deal pertaining to all of their future NIL earnings. Whoever hits it big is going to kickback some of their earnings to the rest of the group. Nobody has to pay anything until they’ve earned a threshold amount, say $10,000. The student-athlete that earns more than $10,000 in NIL endorsements kicks back a percentage of every additional dollar earned back to the group, say 50%.
From a student-athlete perspective, I think this sounds like a reasonable arrangement. The superstar recruit may not be open to the idea of sharing their earnings but I think the average student-athlete would be. If I am the average student-athlete and my teammate and group member signs a big endorsement deal, we both benefit. Instead of being jealous that they are going to get all that money, I am happy for them because I get a piece of the earnings – The effect in the locker room becomes more manageable than a zero-sum environment.
There is still the potential for abuse. The local grocery store could still offer a couple hundred thousand dollars for an in-store appearance. But the upper limits on a student-athlete’s earnings are restricted by the kickback to the rest of the group so the above market rate appearance fee would not benefit a student-athlete singularly but be spread through the entire group.
Examples
Football Group License Income Pool
- Eligibility: Current football team members
- Threshold Amount: $25,000 per year
- Kickback % on Amount Above Threshold: 50%
Men’s Basketball Group License Income Pool
- Eligibility: Current men’s basketball team members
- Threshold Amount: $75,000 per year
- Kickback % on Amount Above Threshold: 25%
Other Sports Group License Income Pool
- Eligibility: Current team members in all other sports
- Threshold Amount: $5,000 per year
- Kickback % on Amount Above Threshold: 10%
The pitch to recruits and to student-athletes would be this: Give up a little bit of the upside to ensure that you get a piece of the revenue. It’s equivalent to hedging your risk. You may become All-American and have tremendous commercial appeal or you may suffer a series of injuries that limit your playing time. This option provides some financial coverage for both ends of that spectrum.
There are two worst case scenarios and neither are really that bad at all:
- Student-athlete never gets an endorsement. They still benefit from the other group members that do.
- Student-athlete signs millions of dollars of endorsement deals. They make a bunch of money but have to share some with their teammates.
Just about every student-athlete thinks that they have commercial market value. In reality, only a few probably do. A group license income pool allows student-athletes the opportunity to capitalize on their identity. This is not the perfect solution but is a viable one.